Inside Health

U.N. Diplomat Reportedly Sought Iraqi Oil Deals for Egyptian

By SUSAN SACHS

Published: February 4, 2005

Correction Appended

Benon V. Sevan, a career United Nations diplomat who headed the oil-for-food program for Iraq, solicited favors from Saddam Hussein's government on behalf of an Egyptian trader who made more than $1.5 million in profits from his privileged access to Iraqi oil contracts, according to an investigative report released yesterday.

The trader, Fakhry Abdelnour, who is based in Geneva, also paid an illegal surcharge of $160,000 to the Iraqis, in violation of the United Nations sanctions against Iraq, while he and Mr. Sevan were lobbying for more business, said the report, which was issued by a United Nations-appointed panel headed by Paul A. Volcker.

In securing the oil contracts for Mr. Abdelnour, Mr. Sevan introduced him into one of the byways of the giant program, one that enriched a small group of traders while pouring money that was meant to buy food and medicine into secret Iraqi slush funds, it said.

Through the intercession of Mr. Sevan, the report said, Mr. Abdelnour was put on a list of individuals who received coupons, or allocations, that gave him the right to buy millions of barrels of Iraqi crude oil, starting in 1998.

The allocations were of little use to people who were not in the oil business and did not have the means, or desire, to lease tankers to ship the oil to refineries and other users. But they were valuable to Mr. Abdelnour, as the profits on his dealings with Iraq demonstrated.

Oil companies were hungry for Iraqi crude oil, especially in the early years of the oil-for-food program when prices for Iraqi oil were below world market prices. But Iraq did not sell oil to just anyone.

Under the guidance of Taha Yassin Ramadan, an Iraqi vice president, and the Revolutionary Command Council, headed by Mr. Hussein, a large portion of the oil allocations were handed out to a select group that included businessmen, politicians, journalists and diplomats who were perceived to be sympathetic to Iraq. According to traders and Iraqi officials, many people who received allocations sold them to an oil company at a premium.

Mr. Abdelnour did the same, the report said, selling his first allocation of 1.8 million barrels in the fall of 1998 to two oil companies for a $300,000 profit and selling another 5.5 million barrels for a $1.2 million profit over the next three years.

His company stopped buying oil in late 2000, the report added, after Iraq started demanding that oil buyers pay under-the-table surcharges on each barrel of oil they received. Many other traders in Mr. Abdelnour's situation have said they also pulled out around the same time because paying the surcharges meant that they could not make as much profit from selling their allocations as they previously had done.

By telling senior Iraqi officials like Mr. Ramadan that he wanted to ''help a friend'' get into the business of buying their oil, Mr. Sevan, played an important role, the investigators said.

''At that time in the program, it was highly unlikely that Iraq would sell oil to a company such as AMEP unless sponsored by a beneficiary that Iraqi officials wished to favor,'' the report said, referring to Mr. Abdelnour's oil-trading company, African Middle East Petroleum.

Senior Iraqi officials, the report added, were pleased with the chance to do Mr. Sevan a favor.

''He was a man of influence,'' the former Iraqi oil minister, Amir Muhammed Rashid, told investigators, and the government hoped, in vain as it turned out, that he had the power to speed up United Nations approval for Iraq to acquire spare parts for its oil industry.

Photo: Benon Savon of the oil-for-food program was cited in a report. (Photo by David Karp/Associated Press)

Correction: February 8, 2005, Tuesday
A picture caption on Friday with an article about an investigative report's findings that the United Nations diplomat who headed the Iraq oil-for-food program had solicited favors from Saddam Hussein's government for an Egyptian trader misspelled the diplomat's surname. He is Benon V. Sevan, not Savon.